What does the end of cheque guarantee cards and cheques mean for business?

On the 16th February 1659, towards the end of Oliver Cromwell’s Commonwealth period, the first cheque anyone knows about was issued. By 2019 (360 years later) we are likely to have seen the last!
The first step towards extinction of the cheque will be June this year with the end of the UK’s cheque guarantee card scheme. After 30th June, consumers will no longer be able to guarantee a cheque up to an amount (a maximum of £250) by handing over a plastic card, usually a debit card.

Although use of the guarantee scheme is in severe decline, an estimated four million people still regularly use guaranteed cheques, typically in shops and to pay bills and tradespeople. For those businesses that rely on the guarantee of payment (once the bank receives it, they have to pay it, subject to certain conditions), it will pose the question as to what alternatives will be in place to secure payments they wish to accept from customers.

As to the future of the ‘cheque’ itself, the proactive movement towards the decline of the cheque will inevitably see the closure of the ‘cheque clearing system’ by around 2018. Cheques hit their peak in 1990 and have been in sharp decline ever since with plastic easier to use in shops and some companies surcharging cheque payers.

An alternative paper based payment facility is a must for people such as the elderly or blind, however for everyone else it is likely that the next 5 year will see a major push towards using existing alternatives such as debit card and making internet and phone banking payments and emerging solutions. It won’t be long before a mobile phone handset can be used for paying for items by simply placing it against the cash till reader or paying your milkman by texting him!

Various internet and faster payment (bank to bank transfers) options are available, however the most obvious alternative is the acceptance of debit or credit cards via a card processing facility (merchant account) provided by one of the UK card acquirers. For those businesses already accepting card payments they have a readymade alternative, but for those new to accepting card payments there is one very important factor to consider and this is that you do not have to have a card processing facility with the bank who holds your business account. Accepting a ‘face to face’ chip & pin card payment is guaranteed and other options are available for over the phone transactions and payment baskets for websites.

A merchant account provider will typically charge a set up fee in excess of £200 and you will then pay processing charges subject to a minimum monthly charge and the cost of a card machine. There is clearly a business decision to make as to the benefits of arranging a merchant account for accepting card payments, however there are additional benefits other than guaranteeing payment such as offering customers a wider choice of payment and also the ability to chase and take card payments on late or unpaid invoices. There are also many different ways of accepting card payment to suit your business, from Mobile GPRS terminals operated via a Sim card to wireless, desk top and virtual terminals accessed via your computer.

Richard Bradley, Director of Accept Cards Ltd As an independent consultancy, Accept Cards advise on all areas of accepting card payments and can arrange a merchant account at a significantly lower cost. Find out more at www.acceptcards.co.uk

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